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Author: Alejandro Brega

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Startup founder. I hold a B.S in Computer Science and have extensive experience and interest in technology, e-commerce, cryptocurrencies and online advertising industry (ad-tech). I worked with leading companies like Softbit, MediaFem, OLX Group, and Telecom. I am living in London, UK.

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The “uberization” comes to the Argentine logistics business

The last mile to the customer’s home is where there is the greatest opportunity for this process to have a high penetration for consumers

Marcelo Méndez, president of Nextbyn for Argentina, a company specialized in the development of computer tools for the mass consumption industry, explains in the next iProfessional interview how new technological trends generate a process of “uberization” in the business of the Argentine logistics

What is the “uberization” of logistics?

-There are applications for order taking but delivery, in general, still has little technological collaboration. It is necessary to develop and massify applications that contribute to the design and assembly of delivery routes, the proposal and the follow-up of online routes, which originate a strong optimization of the distances and times of transfers and delivery among other virtues.

They are business models based on the use of applications and portals that begin to change the way of doing things, daily processes and our habits. The use and experiences of social networks, purchases by applications and / or portals, the transfer with Uber or Cabify services, skateboard services facilitate and accelerate the adoption of new technologies.

Specifically, due to the uberization of logistics, they are startups and / or consolidated companies that allow a point of sale to buy goods and receive them in their business with a model similar to the experience of requesting a car to move from home to the airport.

The parallelism that we can draw begins in that in an application the merchant can request the merchandise that is needed, this offer arrives at a portal, and the logistics company or a self-employed account can be offered to make the delivery, closed the transaction the merchant will begin to have visibility of when, and who will be delivering, at a pre-agreed cost.

Some of the new business and distribution models that impacted and impact on mass consumption are, for example, Mercado Libre and other portals or shopping applications that also offer products from the mass consumption sector (drinks, food, cleaning supplies, etc. .) and they do it complemented with logistic alternatives that surprise as deliveries in 48 hours almost anywhere in the country and a logistics alternative that grows by leaps and bounds such as the so-called pick-up points (“Drop Off”).

This alternative implies that the recipients of the shipments pick them up at pre-established points of their preference, which at the time of purchase they selected; near their homes, jobs or any place of passage that ensures them do not complicate their day to day allowing the comfortable obtaining of the product.

There are also startups such as Shippals that unite the need of a user or merchant who needs to receive a package with self-employed or logistics company willing to deliver.

Others with a focus on medium or long distance trips, destined to assemble Round Trip trips (round trips) where the objective is to try to ensure that the means of transport is traveling loaded, and moving.

-What are your advantages and disadvantages?

-The main advantages are cost reduction, competition, openness to new actors, and the generation of services and businesses that leverage existing ones, which combined take the state of logistics to the next level.

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These services have as main argument that the cost of distribution is much lower than that of door to door, and for the recipients does not cause any conflict, even when they opt for the Drop Off service in the collection of the product (even makes them independent, not having to wait for delivery to your home in a range of days or hours sometimes too wide); and that is why delivery points are growing exponentially: subway stations, paint shops, mail agencies, service stations, are locations and businesses that are complementing their main activity with this “logistics function” that generates some minimum income added to the attraction of potential clients in order to generate operations related to their main activity.

Before the arrival of these services / business model, SMEs and / or distributors were limited by capital or costs in the scope of their distribution network. As an example, an SME that manufactures and markets pickles or natural juices or alfajores chose to sell only in large supermarket chains, and wholesalers in a radius that their logistics could reach, today they open up opportunities to reach new distributors at throughout the country, wholesalers or low-volume outlets that were previously blocked by delivery cost.

Another advantage is related to the sum of new actors (suppliers) and quality of service due to the greater competition. The applications generate the possibility that users and / or customers provide “feedback” about the service received, or possible improvements.

The disadvantages are related to the fact that companies have to adopt a paradigm shift, and the control of their distribution chain goes from being direct to indirect. Some will also have union restrictions which means sitting down in a negotiation, and finding opportunities for both parties to win. The changes are paralyzed by many organizations, but sometimes the crises generate opportunities and those who take advantage of them tend to get stronger from them.

-What obstacles does the “uberization” of logistics in Argentina have?

-The obstacles are related by the restrictions of the labor laws and the rigidity of the unions for being open to change. In recent months, a major such as Mercado Libre, has reached an important agreement with one of the unions and carried out a negotiation that where both parties are winning. The evolution of new agreements can make change happen vertiginously.

The economic and political situation of the country is acting as a brake on investments in the sector. We will have more chances to see new developments, since they are easily replicable in other markets, especially in Latin America, where there are many similarities. On the other hand, investments related to infrastructure for hubs, pickups or drop-offs can be relegated until the situation is clarified.

-What stages affects the “uberization”? For example, the delivery of the last mile, the use of smart lockers.

-The uberization affects all stages: long and medium distance logistics, storage, and last mile in different variants. Long distance and medium distance transfers open the opportunity for round trip trips (or round trips), this generates that an asset such as a truck, ship or train may be moving as much time with merchandise, this generates savings to the producer for reduction of costs in the tariffs, and to the logistics company a use of its asset (investment) to increase turnover.

The last mile is favored by reducing current limitations or restrictions of both the company trying to make the delivery and the recipient, who often cannot be in your business at the time you would have to receive the delivery, or space limitations for Be able to store the merchandise. Example: a small bar that does not have enough space to store all the drinks you can sell in a long weekend.

To capture the opportunity to sell you have 2 options, go to a wholesaler and self-stock, or rent a place near your business to cover these situations. The schedule restriction of the vendor that delivers merchandise may incur higher personnel costs in order to receive it.

-What would be the sectors of producers and services most benefited with the “uberization” of logistics? For example, the producers of the food supply chain.

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-Small producers and SMEs are potentially the main beneficiaries of the new model, since they now have capital and labor resources restrictions to implement new tools and models.

The mass consumption industry is the one that reflects minor changes, the coexistence of two factors is causing other forms of delivery, on the one hand, many brands or small producers find new alternatives and channels through which to market their products, but they find it impossible to generate a logistics structure for distribution.

On the other hand, customers are demanding shorter and shorter delivery cycles, opting or requiring in some cases to receive their products in a matter of hours, even if they have to pay a higher delivery cost (in exchange they limit or minimize immobilized stocks).

To address these challenges, companies are adding smaller classification and distribution centers, placing them closer to customers. In addition, in parallel to the use of traditional delivery services, they are looking for independent contractors who use personal vehicles to transport packages in the same way that transport network companies such as Uber transport passengers.

Is there a possibility that the “uberization” of logistics is implemented by ordinary citizens and thus avoid logistics companies?

-The last mile is where there is the greatest opportunity for the uberization of logistics to have a high penetration for ordinary citizens. Traditional logistics is restricted to perform flexible services, either at night or on weekends, or holidays. A person who has a truck, or small vehicle (van or van, motorcycle) has the opportunity to generate extra income from the model. Currently we are seeing as people who have a car, and free time are willing to make trips with Uber models.

In my opinion, the arrival of ordinary citizens will not prevent logistics companies. My vision is that the combination of both will enhance the model, since a logistics company can use the new model to reduce or eliminate its current restrictions.

Example: a logistics company that has 50 trucks, and cannot meet high season delivery demands, or long weekends can use third-party services executed by ordinary citizens to eliminate their restrictions without having to increase their fleet, since that if he did he would not have a profitable business. It could also cover deliveries during night hours where you currently cannot make them due to union restrictions.

-How does the incapacity of total control of the flow of products, especially with regard to sanitary and health conditions, be solved?

-Traceability of shipments can ensure that products are moved without affecting their status. Also, customers when receiving the merchandise can inform if it arrived in good or bad conditions, these “feedback” regulate and improve services in a short time.

As an example, another industry such as offering rental properties such as AirBnb where an owner begins to have successive negative feedbacks automatically drops their occupancy level, and this makes their efforts to meet the needs of customers, and if possible overcome them. This means that their occupancy levels can improve, but it quickly leaves the market.

Could the use of non-professional personnel generate problems of reliability, trust and responsibility? How would this be solved?

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-Reduce and / or limit barriers requires previously identifying them, and making online training and training available to non-professionals to align services to what the market needs. That company that manages to perform these trainings efficiently and at a reduced cost will have the opportunity to capture the market quickly.

The current tools and solutions of “e-learning” have a degree of maturity that in a short time a startup or new company can generate the content, and even evaluations to bring ordinary people who have never been in this business a necessary knowledge to Provide quality services. Videos and tutorials allow quick workouts, and level knowledge.

-How does the Nextbyn application work?

-The application receives the vouchers to be delivered, usually between 50 and 70 daily delivery points, determines the stops by grouping nearby delivery points that can be taken care of in the same detention, establishes a delivery order obtaining before starting the day the total route detailed and therefore the kilometers of transfers and an estimated delivery completion time.

For customers who have a contact telephone number, they send an automatic notification with the amount, amount of packages and estimated delivery time so that each one is prepared and pending the receipt of the order, trying to reduce rejections.

The application, usually installed on Android devices, is accompanied by a mobile thermal printer that allows you to print a delivery ticket and then register the digital signature of the recipient as a conformity of the same.

The deliveryman / freighter travels the route recording deliveries and rejections, partial or total. The application keeps the stock of the truck allowing to sell some of the rejected products to another point of sale of the route and keeps it informed of the total collected for the deliveries made and for the collection of current accounts.

It seems incredible but a large part of the distributors and freight forwarders, with a volume of at least 50 scheduled deliveries per day, order the invoices printed on paper, defining the route according to their experience, without taking into account traffic variables or conditions of the day; a laudable effort, but really unproductive.

-How does electronic collection operate?

-It is clear that in Latin America we live with a high percentage of informal economy, but how long can it take until we understand that we cannot continue charging cash deliveries?

For security, for time in collection and mainly in the surrender of the mountain of cash generated, the inconvenience of its transfer and other multiple factors, it is impossible not to assume that electronic collection will be part of our habits in the short term. Instead of accumulating that absurd amount of bills and coins, the electronic collection allows through a QR code or a mobile transfer to make the payment in seconds.

As an added value, usually those electronic collection companies within which we can highlight Mercado Pago, Tienda Pago, WiloBank, among others; they offer small and short-term lines of credit, but to which those points of sale eventually have access.

These credits allow them to implement ballot versus ballot programs or increase their stocks on weekends or to specific events covering the debt only a few days after taking it.